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Effects of competition in first-price auctions

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  • Gino Loyola

    (University of Chile)

Abstract

This paper analyzes the effects of industrial concentration on bidding behavior and expected revenues. These effects are studied under the CIAPI model, an affiliated value set-up that nests a variety of valuation and information environments. We formally decompose the revenue effects coming from less competition into five types. The properties of these effects are discussed and conditions for (non)monotonicity of both the equilibrium bid and revenue are stated. Our results suggest that it is more likely that the seller benefits from less competition in markets with more complete valuation and information structures.

Suggested Citation

  • Gino Loyola, 2021. "Effects of competition in first-price auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1527-1567, June.
    • Handle: RePEc:spr:joecth:v:71:y:2021:i:4:d:10.1007_s00199-021-01347-8
    DOI: 10.1007/s00199-021-01347-8
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    More about this item

    Keywords

    Competition; Bidding markets; Conditionally independent affiliated private information model; Affiliated common values; Affiliation effect; First-price auctions;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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